The oil and gas sector is among the eight core industries in India. India has 0.5 percent of the oil and gas resources of the world. It is also the second largest refiner in Asia and third largest oil consumer in the world after China and the US.
In an effort to meet the demand of developing nation, the sector has witnessed significant growth in the last decade. The oil and gas sector of India can be divided into three sections: Upstream segment which includes exploration and production activities, midstream segment which includes storage and transportation activities and downstream segment which includes refining, processing and marketing. The upstream segment is dominated by state-owned Oil and Natural Gas Corporation (ONGC). The midstream and downstream segments are majorly operated by Indian Oil Corporation Limited (IOCL) and Reliance India Ltd (RIL).
India has proven oil reserves of 600 million metric tonnes (MMT), and gas reserves of 1.2 trillion cubic meters. Production of crude oil reached 0.68 mbpd in 2018-19. Natural gas production during the same period stood at 32.06 billion cubic meters (bcm).
The coal deposits in India are mainly confined to eastern and south central parts of the country. The states of Jharkhand, Odisha, Chhattisgarh, West Bengal, Madhya Pradesh, Telangana and Maharashtra account for 98.26 percent of the total coal reserves out of which Jharkhand had the maximum share (26.06 percent) in the overall reserves of coal in 2017-18 followed by Odisha (24.86 percent).
Onshore production accounted for 50.68 percent of total production, while offshore contributed the remaining 49.32 percent. India’s Oil consumption has expanded at a CAGR of 4.78 percent during 2007–17 to reach 4.69 mbpd in 2017. India’s gas consumption has also registered a CAGR of 3.40 percent between 2007 and 2017 to reach 54.2 bcm in 2017. In terms of actual capacity, ONCG leads the crude pipeline network with a share of 41.6 percent, followed by IOCL at 33.4 percent out of the 145.6 MMTPA as on 1st April 2019.
Oil exports in India include diesel, gasoline (petrol), aviation turbine fuel, fuel oil, and naphtha. The Indian government subsidizes refineries that are specialized for exports. It also channels investments towards export-oriented infrastructure such as pipelines and export terminals.
India is one the largest exporters of refinery products due to the presence of various refineries. The country had the fourth largest oil refining capacity in the world in 2017. The total value of petroleum and petroleum products exported from the country increased to US$ 47.8 billion in 2018-19 from US$ 31.2 billion in 2015-16. High Speed Diesel was the major export item among petroleum products, followed by motor spirit, aviation turbine fuel and naphtha.
Foreign Direct Investments
The government allows 100 percent Foreign Direct Investment (FDI) in upstream and private sector refining projects. The FDI limit for public sector refining projects has been raised to 49 percent without any disinvestment or dilution of domestic equity in the existing PSUs.
During April 2000 to March 2019, the FDI inflow in Petroleum and natural gas sector was US$ 7018.8 million which accounted for 1.67 percent of total FDI inflows in the country.
Energy demand of India is anticipated to grow faster than energy demand of all major economies, on the back of continuous robust economic growth. Consequently, India’s energy demand as a percentage of global energy demand is expected to rise to 11 percent in 2040 from 5.58 percent in 2017. Crude oil consumption is expected to grow at a CAGR of 3.60 percent to 500 million tonnes by 2040 from 221.76 million tonnes in 2017. Natural Gas consumption is forecasted to increase at a CAGR of 4.31 per cent to 143.08 million tonnes by 2040 from 54.20 million tonnes in 2017.
LNG imports of India have significantly increased, providing opportunity to boost production capacity of midstream segment. In light of mounting LNG production, huge opportunity lies for LNG terminal operation, engineering, procurement and construction services. The gas consumption is projected to reach 143.08 bcm by 2040. On the other hand, government is planning to invest US$ 2.86 billion in the upstream oil and gas production to double the natural gas production to 60 bcm and drill more than 120 exploration wells by 2022.
Overall, the outlook for the industry is positive in the medium term.